What is the financial risk of China real estate under the new situation?

Abstract: Real estate is one of the fastest growing industries in China since the mid-1980s. However, the asset-liability

What is the financial risk of China real estate under the new situation?

Abstract: Real estate is one of the fastest growing industries in China since the mid-1980s. However, the asset-liability ratio of its enterprises is much higher than that of other industries, and its financial risk is also higher than that of other industries. Therefore, an in-depth analysis and study of the financial status and risks of China's real estate enterprises, and prevention and control of financial risks will help China's real estate enterprises develop faster and better, and also help China's national economy to a new level.

Paper Keywords: real estate financial risk prevention and control

As we all know, the real estate enterprise is a special industry, which is qualitatively different from other construction enterprises or construction units. It is an industry integrating real estate development and construction, commercial sales, supporting management and service. It has the unique characteristics of long production cycle, large investment, high market risk and high policy control risk, and it is highly capital intensive. At present, most real estate enterprises have changed from a single project company to a group operation mode, and their overall anti-risk ability has been enhanced. However, due to the uniqueness of the real estate industry, the financial risks it faces are still a focus worthy of attention and attention. To this end, this paper will put forward some personal suggestions on the prevention and control of real estate financial risks in China based on my own work practice.

1 definition of financial risk

Financial risk refers to the possibility that the final financial results obtained by an enterprise in a certain period and within a certain range deviate from the expected business objectives due to various unpredictable and uncontrollable factors in various financial activities, thus causing the enterprise to suffer economic losses or greater benefits. The financial risks of real estate enterprises are mainly manifested in financing risks, investment risks and operating risks.

2 real estate financial risk prevention and control measures

2. 1 Fully investigate the market, maintain the principle of conservatism in the investment risk decision-making process, and effectively prevent and control investment risks.

To improve managers' awareness of investment risk management, we should maintain the principle of prudence in investment decision-making and reduce investment risks as much as possible, so as to improve the ability of enterprises to prevent and control financial risks and ensure the sustainable development of enterprises. For many enterprises after bankruptcy, a considerable number of enterprises are due to managers' failure to fully investigate the market or to maintain the principle of conservatism in project investment decision-making, so that when the project deviates from expectations, enterprises are short of funds and financial risks follow. Therefore, this paper holds that due to the characteristics of large investment amount, long payback period and difficult adjustment after capital investment, real estate enterprises must fully understand urban planning information, surrounding land supply and utilization, surrounding real estate development and supply and market demand information before making investment decisions, and at the same time need to overcome blind optimism, reduce investment risks as much as possible, weigh benefits and risks, and find the best combination.

2.2 Do a good job in prevention and control of fund-raising risks.

Enterprise financing risk is generally caused by internal and external factors. There are many internal factors, which may be improper financing methods, blind investment by enterprises, which makes the debt scale of enterprises too large, or unreasonable debt structure of enterprises. There are many external factors, or because of the uncertain factors of market conditions; Or changes in interest rates and exchange rates in financial markets. , will lead to a decline in corporate profits, these factors are self-evident for real estate enterprises with huge capital needs, and their financial risks will be affected. To this end, this paper believes that real estate enterprises can prevent and control the emergence of financing risks through the following ways:

First, optimize the capital structure of enterprises and change the financing mode. Real estate enterprises need to arrange their capital liabilities scientifically and reasonably according to their own actual situation, so as to achieve moderate liabilities and reasonable arrangement of long-term and short-term funds. Under the current macroeconomic policy control, it is necessary to change the financing mode of relying solely on bank development loans, and diversify into trust financing, private placement of equity and creditor's rights, sales financing and asset securitization to ensure that the project funds are sufficient and the capital chain will not break.

The second is to establish a rolling budget mechanism, especially to strengthen the budgeting and management of cash flow and do a good job in financial early warning analysis of enterprises. Whether an enterprise can survive depends not entirely on whether it is profitable, but on whether it has all kinds of cash for expenditure. Therefore, accurate cash flow budget can provide early warning signals for enterprises, reveal the cash surplus and shortage of enterprises, and enable managers to take measures to deal with possible risks as soon as possible. Especially in the real estate industry, the demand for funds is large, and the accurate preparation of cash flow budget is more important. In order to accurately prepare the cash flow budget, real estate enterprises should summarize the specific objectives of each department according to the project development and sales plan, adopt the principle of conservatism, quantify future expected income, sales cash, project cash expenditure, investment plan and financing plan, establish a comprehensive budget mechanism for enterprises, predict future cash receipts and expenditures, and make rolling budget preparation with monthly, quarterly, semi-annual and 1 year as the cycle to reflect the changes of project cash flow in time. And in the implementation process, in strict accordance with the cash flow budget, when there are major changes, it is necessary to adjust in time to make ends meet.

2.3 Strengthen management to avoid financial risks hidden within the enterprise.

First, strengthen and improve the internal control system of enterprises. The internal control management of an enterprise is inseparable from its business activities. Enterprise internal control management mainly includes the authority and responsibility of office staff, the operation process of various businesses, the analysis and evaluation of various businesses, and the formulation and implementation of internal management systems. For real estate enterprises, every economic business activity should have two or more control links that restrict each other. The responsibilities, authorities and working procedures between decision makers and executors, accountants, managers and custodians are clearly defined in terms of asset disposal, fund scheduling, sales settlement, guarantee provision and foreign investment. Therefore, strengthening and perfecting the internal control system of enterprises, making the internal control system more standardized and scientific, will be conducive to effectively preventing and controlling possible financial risks of enterprises and reducing operational risks.

The second is to strengthen and improve enterprise cost management and establish a target cost system. Cost management is a key link in the process of enterprise management and operation, which is related to the profit and income of enterprises. Once an enterprise loses its profits and income, it is likely to face losses and bankruptcy, especially real estate enterprises, and its influence lies in other aspects. At present, China's real estate development is in full swing and the competition is fierce. How to gain competitive advantage in fierce competition and strengthen cost management will be a very important link. The author believes that cost management runs through the whole process of project investment decision-making and project construction. Enterprises should reasonably predict the future cost trend according to the current market cost state, reasonably predict the target cost of the project, and timely correct the target cost according to factors such as changes in materials and labor prices during the development and construction process to guide project decision-making.

Thirdly, the dynamic investment calculation model of the project is established to reflect the change of the expected income of the project in time and provide support for management decision-making. This paper holds that making full use of information technology, updating data according to project development progress and dynamic cost, and combining with project sales forecast, quarterly rolling project income and cash flow forecast can reflect the influence of enterprise cost and sales price on enterprise income in time, reflect the surplus and deficiency of project funds in time, provide more scientific and effective information and data for decision-making, and also help to do a good job in monitoring and analysis of project implementation, adding another insurance for enterprise financial risks.

3 Conclusion:

To sum up, compared with other industries, the financial risk of real estate enterprises is much higher than that of other industries, and it is more necessary for enterprise managers to be rigorous, improve their awareness of financial risk management, take every project seriously, make dynamic investment calculation and analysis on the whole process of the project, strengthen the management of enterprise investment risk, operational risk and financing risk, prevent and control the generation and development of enterprise financial risk, and ensure the healthy and steady development of enterprises.

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